Good neighbor policy in a globalizing world

Last week, President Duterte sat down with his “idol” Russian President Vladimir Putin in Lima, Peru, on the sidelines of the annual leaders’ meeting of the Asia Pacific Economic Cooperation (APEC).

During their warm and friendly meeting, Putin committed to Duterte that Russia could import up to US$2.5 billion (P124.17 billion) worth of Philippine agricultural products, including fruits and vegetables. This is a huge volume, considering Philippine exports to Russia only amount to around US$46 million (P2.28 billion) a year on average.

Trade and Industry Secretary Ramon Lopez told the media that nothing was specified in terms of which products were going to be exported, although the Philippines already sends to Russia bananas, mangoes, desiccated coconut, and carrageenan.

Breaking into new markets for our products is always a welcome development. But in fact, I find it highly doubtful that we currently have the capacity and competitiveness to quickly ramp up production by at least 54 times and suddenly supply at the volumes implied by Russia’s committed investment.

Shortages in key farm products also loom for 2017, as the Department of Agriculture (DA) recently cancelled all import permits for meat and plant products — except for rice and corn — to curb rampant technical smuggling. If we can’t even fill our local production, it’s pollyannaish to try supplying Russian demand.

This is not to say better relations between the Philippines and Russia should not be pursued. I can see positive benefits created if Moscow and Manila traded more and fostered better working diplomacy.

For one, Russian tourists make good guests as they stay in the country longer than the average tourist. The first concrete step is to have a bilateral civil agreement to establish a direct Vladivostok-Manila flight.

But moves towards closer Philippine-Russian trade ties should not be at the expense of existing trade relations. Consider our duty free trade with the European Union (EU), under its General Scheme of Preferences Plus (GSP+).

The Philippines’ bid to be included in the GSP+ was approved in December, 2014, making us the only one in ASEAN enjoying the privilege. Some 6,200 products — including our fruits, coconut oil, fish, and textiles — are now exported to EU countries at zero tariff.

During the first year of the scheme, Philippine exports to the EU were estimated to have increased by up to P32.5 billion. That translated to as much as 267,000 jobs in the provinces, given the scheme’s preference for marine, fisheries, and agricultural products and for SMEs.

According to a January, 2016, European Commission report, Philippine exports to the EU under GSP+ jumped by 27 percent for the first six months of 2015 (H1), amounting to around €743 million (P39.2 billion) — exceeding initial estimates.

The largest increases in agricultural products came from animal products (157 percent), prepared foodstuffs (72 percent), and wood and wood charcoal (199 percent). In fact, by September, the Philippines became the EU’s number one supplier of “tuna prepared as sardines.”

The same European Commission report also showed that of the Philippines’ €1.084-billion worth of GSP+ eligible exports to the EU measured in the same period (H1 2015), only €681 million were entered under the scheme — resulting in a 62.8 percent utilization rate. In a way, that means — even with the significant increases in exports — we were only making use of 62.8 percent of preferential duty-free entry.

It is good national policy to develop new markets for our products or even woo investments and tourism from the largely untested but immensely promising Russian market. But to repeat, such drive should not prompt us to ignore to develop safe and sure markets.

The Philippines may be undergoing a geopolitical or even an ideological shift in its foreign policy, moving closer to countries like China and Russia. This should not mean tested allies and longtime trading partners should be abandoned. In principle, good relations should be cultivated with as many countries as possible. At the same time, our country needs to trade and invite foreign investments in order to close the poverty and income inequality gap in our country.